Ex Trader’s Thoughts On Bitcoin, Blockchain And Cryptocurrencies

Recently I’ve had a ton of guys asking me my opinion on Bitcoin, Cryptocurrencies and blockchain. I want to give you my thoughts based on close to four years a prop trader, my time in financial sales and a decade and a half of studying financial markets.

First off, I want to seperate Blockchain and Cryptocurrencies. Blockchain is an incredible technology, it’s insanely disruptive and will continue to be. I see Blockchain being implemented across many industries like land titles, healthcare, finance, banking and many others. Heavyweights like Mark Cuban and Richard Branson also agree.

With that said, Bitcoin and Cryptocurrencies, although they rely on Blockchain tech, are completely different animals on which I have mixed views.

My Thoughts On Bitcoin And Cryptocurrencies

Bitcoin Pros

Bitcoin is innovative, disruptive and interesting tech

Bitcoin is massive with a market cap of $162 Billion, equal to General Electric

Virtual currencies delivered an insane return in 2017 of 1620%

Crypto has more anonymity than owning traditional currency

Better protection against hackers at least the cryptocurrency, especially if you hold in an offline wallet

Useful for buying things online that you want to order anonymously

Also useful because you don’t have to worry about credit card info being compromised

For the super smart, with a big rig, mining bitcoin is an option, one you don’t have with currency

Mining is also an ingenious way of controlling the supply of the currency/rarity

Bitcoin can be used as a hedge against corrections or collapse of traditional currencies

Unregulated without gov’t interference (I’ve also listed this as a con below)

Bitcoin Cons

Limited as a means of exchange to certain places online (at least for now)

Limited data as compared to 200 years of USD data and longer for GBP and gold

Not backed by gov’t power, might be positive to some, but no one is enforcing it’s use

Might not exists 30 years from now, USD and GBP almost certainly will

Unregulated without gov’t protection

We don’t know who created it although there are many theories

If you’ve done your homework you know who owns the central banks and how they operate

More anonymous than a bank, but I don’t believe in total anonymity online

Not as anti establishment as believed: Bill Gates and other heavyweights support it

Not immune to hacks, Mt. Gox hack, $450 mil in bitcoin lost and likely stolen

Bitcoin As A Trade

As an ex pro trader, I def do not recommend active trading (gambling) in any shape or form

I made a lot of money trading but it didn’t last and I was lucky

We also had lightning fast execution, supercheap trades, and arbitrage opportunities

None of those opportunities exist anymore, cowboy traders have been replaced by algo traders

Actively trading your own account as an amateur is a disaster waiting to happen

And please, please do not buy some scumbag’s scam Bitcoin trading system

Even as a longer term trade, it’s still a NO for me on Bitcoin

You have only a few years of technical chart data to play with

No idea of the longer term ranges and patterns (as opposed to 100+ years of S&P data)

You also have no fundamentals to play off of (Earnings reports, inflation, news on stock etc.)

Bitcoin as an investment

Warren Buffett says “You can’t value bitcoin, because it’s not a value-producing asset.” and I agree

At least in the traditional value investment model (Buffett/Munger/Ben Graham)

It also doesn’t have a moat, or protection leaving it ripe for competitors

As of now there are 2,000 cryptocurrencies including Ethereum and Litecoin

Just because Bitcoin was first, doesn’t mean it will exist 10 years from

Broadcast.com made Mark Cuban a billionaire, 17 years later it doesn’t exist

You can look to the internet tech bubble to see 1000 of other non existent companies

Whereas as a company like Facebook, which launched well after the boom, became dominant

With that said, as a speculative buy and hold it’s an option, just not one that I like

The idea is investing on the idea of bitcoin as a future means of exchange

With that said, without chart patterns stretching back 100 years, you’re shooting in the dark

At least with the tech bubble you had 100 years of data to go off off

And you know that Equities/S&P crash every 8 to 15 years

With Bitcoin you’ve got 5 years

And at 10K a coin, buying the top of the market will hurt you

Without chart patterns going back 100 years, its so hard to see if you’re not buying in at the top

You could do a small buyin and dollar cost avearge in for the next 30 years but I still don’t like it

With an index fund this is a move (although not my favorite)

But that’s because you know the S&P will be here 30 years from now

Because the index is based on the top 500 companies that produce real, tangible wealth

Bitcoin could easily be delisted or regulated to death a decade from now

Ideas On The Future Of Bitcoin And Cryptocurrencies

First off I make no predictions and have know idea what the future of Cryptocurrencies is

It will however be very interesting to watch

Crypto may continue to expand and take wealth away from traditional currencies

Or the powers that be may crackdown, regulate or outlaw on crypto entirely

If you’re in love with crypto you might not want to believe that

But remember, governments have all the guns, and force is what matters in the real world

It all depends on who’s behind the rise of crypto

Odds are technocrats will be the first to embrace crypto

Bill Gates has already lent his support

The power structure went from kings to bankers and as moving towards technocrats

I can see Microsoft, FB, Google and Apple getting behind crypto and creating their own currencies

I’m sure technocrats would love to wrest that power from governments and bankers

I can also see the measure banks adopting blockchain and currencies of their own

Banks and Gov’ts are exceptionally powerful and I don’t see them going anywhere any time soon

They will either adapt and adopt or work towards regulating/outlawing crypto

With that said, those are only my thoughts and are pure speculation

I learned from four years of 400 trades a day that no one can effectively predict the future

You can only make informed decisions based on the information you have

And the information I have on blockchain and crypto is extremely limited

And conditions are so volatile, new and unpredictable that all I can offer is speculation

My Advice

At this point I don’t plan on owning any bitcoin except maybe a small amount for online payments. Maybe in the future, if it becomes better accepted as a means of exchange. But that would only be part of a currency basket to hedge against a USD collapse.

I believe Bitcoin is in a bubble right now, but I have no idea where the top is. Bitcoin could be 30K a coin next year or 2K. All I know is everyone and their brother is talking about buying Bitcoin and that usually means bubble.

Once you have all that together you’re out of survival mode and comfortable. Then and only then can you really start looking at investing.

But even then, have you maxed out your investment in your high margin business?

My buddy was making $4,000/month as a car broker, off $500 in Google Adwords marketing. I know coaches getting the same return. And if you have an info products business like me, it’s even better, the $300 or so I spend on developing a book is returned to me easily on the first day of the launch.

Even if your gamble turns out to be correct and you make $20,000, it sets a dangerous precedent. Because you’re not going to stop, you’ll play again and next time you’ll take a hit that maybe you won’t be able to punch out of. When you adopt a gambler’s mentality, no amount of money you make is ever safe.

If you’ve got a six figure business and 100k in the bank, and set aside 4 percent of your net worth every year for speculation, and have iron discipline, that’s a different story. Because you know that’s your throwaway money that you don’t care about losing.

And you go in with an exit plan and stop loss, ie. you drop $4,000 on the trade, with an exit of $40,000 or a 1000% return, and a stop loss of $1,000 or a 3k loss. Or maybe it’s just a 4k buy and hold with a 30 year timeline and a stop of 0/delisting of Bitcoin.

You just need to recognize that’s a totally different mentality from most guys hopping into Forex, Etrading or Bitcoin. I’m telling you, trading is brutality and amateurs have no business in it. No one I came up with is still trading and there must have been thousands of guys who came through our doors. Don’t let FOMO get you into trades you can’t afford to be in.

But again the choice is yours, but hopefully you can weigh the information here with an open mind.

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9 Comments

Bilal

December 6, 2017 at 8:48 am

Hey Will, quick question. Do you use or have used creatine? And what are your thoughts on it? Thank you

One question Will.
Since you don’t do trading anymore, do you still keep your “long term money” in ETFs or something like that at all?
Thanks

Seth

December 15, 2017 at 3:11 am

Will, such incredible wisdom in many areas for a younger dude. I gave up years ago on trying to beat the markets, and I also gave up playing poker, blackjack, etc for anything more than a bit of infrequent vacation entertainment with money I fully expect to lose (and have a limit on).
In the markets, the petro, gold, etc futures, med marijuana stocks, techs, etc were fun… until you take a terrible month or even very terrible week and fall flat on your face. If there were shortcuts, everyone would be taking them. For every Amazon or Tesla or Facebook or Ferrari, there will be many dogs that don’t beat the S&P.
Personally, I’ve basically settled on the “boring” All Weather Robbins/Dalio type of setup with a mix of US and international bonds, stocks, commod, and metals. Your other article on markets being random and impossible to beat in the long term is 100% correct. It is boring as hell to buy bonds or index funds, but it works well, remains virtually crash-proof, and can be done nowadays with very little load now that quality ETFs let you get those assets much cheaper than mutual funds do.
Keep up the great info, man! Most guys will learn the hard way, but at least they will hopefully learn while the stakes are low.

Mistermoses

December 15, 2017 at 3:48 pm

This is quite possibly the most unbiased, logical and ‘common-sense’ opinion piece on crypto I’ve read so far – and I have read a boatload. Way to go Will – this deserves a wider audience. I have heard of folks taking high interest/student loans to leverage for Bitcoin, which is absolute insanity!!

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